The bullish rally in the markets | 07 April 2023

#SP500:

The U.S. Commerce Department reported that the PCE price index excluding food and energy increased 0.3% for February. Including food and energy, headline PCE rose 0.3% monthly and 5% annually, compared with 0.6% and 5.3% in January, respectively. As the Fed rate hikes are now kind of starting to take hold right about a year later since they first began, perhaps is a sign that their hikes are starting to cool inflation. The equity market seems to be delighted with the slight tick lower in inflation, as it should be, because it underscores that the Fed's campaign is in fact working, albeit slowly. The immediate reaction in the Treasury market confirmed that, because we saw the yields tick down.

Trading recommendation: buy 4077 and take profit 4187.

XAUUSD:

The failure of SVB earlier last month and of Signature Bank two days later forced officials at the Federal Reserve and other finance sector overseers to take emergency action to shore up the banking system to head off a wider run-on deposit. Officials have said deposit flows have stabilized, and the University of Michigan's findings support a view some policymakers have voiced that the episode, while jarring, may prove to have a limited effect on household consumption. The Federal Reserve, which has added 475 basis points to U.S. interest rates through nine rate hikes over the past 13 months, is expected to end the tightening cycle between May and June. The central bank has ruled out any rate cuts for this year, though analysts aren’t exactly sure about that.

Trading recommendation: range 1937 -2017.

#WTI:

The U.S. Personal Consumption Expenditure index, the Federal Reserve's preferred inflation gauge, rose 0.3% in February on a monthly basis, compared with a 0.6% rise in January. Signs inflation is slowing tend to support oil prices as this could point to less aggressive interest rate hikes from the Fed, lifting investor demand for risk assets like commodities and equities. Oil prices were also buoyed after producers shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline.

Trading recommendation: buy 78.20 and take profit 83.00.